High Court rules against Official Receiver in Kids Company decision

The High Court has today ruled against the Official Receiver in its case for disqualification brought against the directors of the charity “Kids Company”, together with its CEO Camila Batmanghelidjh.

This is good news for those who are trustees / directors of charitable companies, as well as charity trustees more generally.

The Court decided that although the trustees / directors of a charitable company are subject to the same duties of other companies, the fact that “Kids Company” was a charity could not be ignored, and so reaffirmed the historical benevolence shown by the Court to charity trustees where there has been no dishonesty or intentional breach of duty.  

The Official Receiver had sought to argue that the trustees / directors were responsible for financial mismanagement, in that they had allowed the charity to operate an unsustainable business model. The primary purpose of an application to disqualify directors, as made by the Official Receiver here, was identified as being to protect the public.

The Court was of the opinion that the public, however, did not need any protection from the trustees / directors of “Kids Company”, who were described in the judgment as “a group of highly impressive and dedicated individuals who selflessly gave enormous amounts of their time to what was clearly a highly challenging trusteeship”.

Disqualification of any of the "Kids Company" trustees was unwarranted, the Court was "wholly satisfied". It also decided that Camila Batmanghelidjh was not a de facto director, but that even if she had been such, no disqualification order would have been made against her in the circumstances.

The Court also noted that there was a risk that disqualification proceedings based on “wide ranging but unclear allegations of incompetence rather than any want of probity” were likely to discourage individuals from becoming charity trustees.

This is a judgment that will provide a great deal of comfort to the sector, given that there are, no doubt, many charity trustees at present being forced to make difficult financial decisions on behalf of their charities.

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